Have you ever thought about how different restaurant experiences can contribute to your portfolio? The company analyzed today not only specializes in exclusive dining experiences, but also offers stable dividends for investors looking for reliable sources of income.

With its diverse portfolio of culinary brands, this company is able to continually innovate and adapt to changing market conditions, making it an attractive choice for dividend investors.

Company introduction

Darden Restaurants $DRI is a major U.S. multi-brand restaurant operator based in Orlando, Florida. The company was founded in 1968 and has since grown into a leader in the full-service restaurant industry. Darden owns and operates several well-known restaurants, including Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.

This diversity of brands allows Darden to offer a variety of cuisines and dining experiences, catering to a wide range of customer preferences. For example, Olive Garden is known for its Italian food, while LongHorn Steakhouse specializes in steaks and grilled meats. Yard House is popular for its wide selection of beers and modern American cuisine, and The Capital Grille is an upscale steakhouse with excellent wines and elegant surroundings.

Darden operates primarily in North America, where it has an extensive network of restaurants. With its scale and expertise, the company is able to effectively manage operations and deliver value to its shareholders. In 2024, Darden achieved overall revenue growth of 8.6%, driven by successful menu innovations, the addition of more restaurants, and effective cost management.

One of the key interesting things about Darden is their commitment to sustainability and community involvement. The company strives to minimize their impact on the environment and support the local communities in which they operate. Darden also emphasizes training and development of their employees, creating a positive work environment and fostering long-term customer loyalty.

The company's history is filled with significant milestones. For example, Olive Garden, one of Darden's most prominent brands, opened in 1982 and quickly became popular for its Italian food and family-friendly environment. In 2007, Darden purchased the LongHorn Steakhouse and Capital Grille restaurant chain, expanding its portfolio to include upscale and specialty restaurants.

Overall, Darden Restaurants is a dynamic and successful company that is constantly evolving and adapting to changing consumer preferences. Its wide range of restaurants and commitment to excellence in customer service make it a popular choice for customers and investors alike.

Why is DRI an interesting dividend choice?

Darden is a top dividend stock backed by strong financial performance and a positive outlook for the business. Total revenue for fiscal 2024 grew 8.6%, driven by successful menu innovations, the addition of more restaurants, and effective cost management across its portfolio of popular restaurant brands. The company's ability to adapt to changing consumer preferences and maintain high customer satisfaction confirms its strength in the market.

Darden repurchased $97.3 million worth of shares in the fourth quarter and increased its quarterly dividend to $1.40, a 6.9% increase over its third quarter payout. Darden's current dividend yield of 3.7% is nearly half a percentage point higher than its five-year average.

How was the last quarter?

Total sales increased to $3.0 billion in the fourth quarter of 2024, driven by the addition of 80 Ruth's Chris Steak House restaurants and 37 new restaurants. Same-restaurant comparable sales were flat, with Olive Garden down 1.5%, LongHorn Steakhouse up 4.0%, Fine Dining down 2.6% and other businesses down 1.1%. Darden's consolidated sales remained flat with the prior year. Reported diluted net earnings per share from continuing operations were $2.58. Excluding costs associated with the Ruth's Chris transaction and integration, adjusted diluted net earnings per share were $2.65, an increase of 2.7%.

For the full fiscal year 2024, total sales increased 8.6% to $11.4 billion, driven by 1.6% same-restaurant comparable sales growth and the addition of new restaurants. Olive Garden and LongHorn Steakhouse achieved sales growth of 1.6% and 4.7%, respectively, while Fine Dining saw a 2.4% decline and other businesses declined 0.7%. Reported diluted net earnings per share from continuing operations were $8.53, and after excluding costs associated with the integration of Ruth's Chris, adjusted earnings were $8.88, an increase of 11.0%.

Rick Cardenas, President and CEO of Darden, said: "We had a strong year due to discipline, excellence in our core operations and control over what we could control. This allowed us to beat the high end of our earnings per share expectations that we provided at the beginning of the fiscal year, despite the deteriorating conditions that emerged in the second half of the year."

Segment profit, which represents sales less food and beverage, labor, operating expenses and marketing, showed mixed results across brands. Olive Garden and LongHorn Steakhouse reported strong segment profit, while Fine Dining saw strong growth from its acquisition of Ruth's Chris.

Darden also announced guidance for fiscal 2025, when it expects total sales of $11.8 billion to $11.9 billion, same-restaurant sales growth of 1.0% to 2.0%, the opening of 45 to 50 new restaurants and total capital expenditures of $550 million to $600 million. The company expects inflation of about 3.0% and an effective tax rate of about 13%. Diluted net earnings per share from continuing operations are expected to be in the range of $9.40 to $9.60.

Dividend Analysis

Darden Restaurants recently declared a dividend of $1.31 per share, payable on May 1, 2024. Using data from GuruFocus, we take a look at the dividend performance of Darden Restaurants Inc and evaluate its sustainability.

Darden Restaurants Inc is the largest full-service restaurant operator in the U.S., with consolidated sales of $10.5 billion in fiscal year 2023, representing a market share of 3%-4%. The company manages a portfolio of ten restaurant brands, including Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Ruth's Chris, Yard House, The Capital Grille, Seasons 52, Eddie V's, Bahama Breeze and The Capital Burger. Darden Restaurants Inc generates revenue almost exclusively from owned restaurants, although a small network of franchise restaurants and packaged food sales through traditional channels contribute modestly.

Darden Restaurants Inc has maintained a consistent dividend payment history since 1995, with dividends distributed on a quarterly basis. The company's current 12-month dividend yield is 3.29% and the 12-month forward dividend yield is 3.35%, indicating an expectation of increased dividend payments over the next 12 months. Over the past three years, the annual dividend growth rate has been 22.40%, and over the past five years this rate has declined to 11.70% per annum. Over the past decade, the annual dividend per share growth rate has been 6.50%.

A key factor in assessing the sustainability of dividends is the company's payout ratio. The dividend payout ratio provides insight into the proportion of earnings that a company pays out as dividends. A lower ratio indicates that the company is retaining a significant portion of its earnings, ensuring that funds are available for future growth and unexpected downturns. As of February 29, 2024, Darden Restaurants Inc's dividend payout ratio was 0.35, indicating its sustainability.

In terms of profitability, Darden Restaurants Inc has a GuruFocus rating of 8 out of 10, indicating good prospects for profitability. The company has reported net income in 9 of the last 10 years. The company's growth metrics, such as 3-year growth in sales per share and 3-year growth in earnings per share, also point to a strong growth trajectory. Darden Restaurants Inc's revenue has grown at an average annual rate of 10.30%, outperforming approximately 67.37% of its global competitors. Earnings per share has increased at a compound annual growth rate of approximately 60.40% over the past three years, a rate that outperforms approximately 90.54% of global competitors.

A look at recent years' performance

Key performance indicators

Darden Restaurants is a robust player in the market with a market capitalization of $17.10 billion. The average daily trading volume is 1.26 million shares, indicating solid liquidity in the market.

In terms of valuation, Darden has a price-to-earnings (P/E) ratio of 16.78, indicating relatively healthy market expectations for the company's future profitability. The P/B ratio of 7.61 indicates that investors are willing to pay a premium for the company's equity, often reflecting high asset quality and a strong reputation. With a price-to-sales (P/S) ratio of 1.50, it can be seen that the market values each dollar of the company's sales at $1.50, which is a reasonable valuation compared to the industry.

Darden's financial stability is supported by a debt-to-equity (D/E) ratio of 0.65, indicating a moderate level of debt to equity. The debt/equity ratio (D/C) of 0.39 further confirms the company's ability to effectively manage its debt burden.

In terms of performance, Darden has very attractive return ratios. The return on assets (ROA) of 9.08% shows the efficient use of assets to generate profits. An exceptionally high return on equity (ROE) of 47.73% indicates strong management performance in leveraging shareholder investments. Return on Invested Capital (ROIC) of 31.18% underscores the company's ability to generate value from investments.

In terms of margins, Darden achieves a gross margin of 19.07%, which reflects the ability to maintain a low cost of goods sold. The operating margin of 11.55% and net margin of 9.02% further confirm effective management of operating costs and overall profitability. Free cash flow (FCF) of 5.72% reflects the ability to generate cash after all operating expenses and capital expenditures, which is key to sustaining dividends and reinvesting in growth.

⚠ You will find a lot of inspiration on Bulios, but the final stock selection and portfolio construction is of course up to you, so always do a thorough analysis of your own. Practical tools within the membership Bulios Black are always at your disposal.